Joined: August 6th, 2004, 8:33 pm
The scoop on the new NBA Deal
Draft and free agency will be altered
By Chad Ford
The NBA and union reached an agreement on the framework for a new collective bargaining agreement on Tuesday.
The agreement appears to be a real compromise by both sides. In fact, NBA commissioner David Stern called the deal a "50-50 agreement" at the press conference.
The owners got several concessions they wanted: slightly shorter player contracts, smaller raises, shorter guaranteed rookie contracts and an age minimum.
The players received a guarantee that 57 percent of basketball-related income would be paid to the players. They also got an increase in the salary cap, a small reduction in the amount of escrow taxes on their salaries and a general raise in the caps on salaries.
Over the course of the next few weeks, the two sides will work out the final details and draft the CBA, and the finer points of the agreement will come to light.
Until then, here's a broad overview of what the new agreement means for free agency and the draft, based on the league's statement, Stern and Billy Hunter's press conference and an exclusive Insider interview with deputy commisoner Russ Granik on Tuesday evening.
Three big changes in the CBA should have a big effect on both this year's and next year's draft -- the increase in the minimum age to 19, the reduction of guaranteed years on rookie contracts and the development of the NBDL as a legitimate minor league.
The age minimum
Currently, players are eligible to declare for the NBA draft after their high school senior class graduation, if they are from the United States. If they are international players, they must be 18 years old by the night of the draft.
For several years, Stern has been vocal in calling for an age minimum of 20 for players to be eligible for the draft. Union director Billy Hunter has been just as vocal opposing the limit.
The players and owners agreed to a compromise that sets the age minimum at 19, plus one year removed from high school for American players.
International and American players must turn 19 during the calendar year they are declaring for the draft. That means that -- gasp -- players who are 18 could still play in the NBA. Draftees just need to turn 19 by Dec. 31st of the year they want to enter the draft. Players born in November or December could appear in NBA games prior to their 19th birthday.
Players who spend a year in prep school would be eligible for the draft, according to Granik, as long as they graduated from high school during the previous year.
The rule would go into effect for the 2006 NBA draft.
When the age minimum is implemented, it will dilute the draft for at least one year. If the rule had gone into effect last year, for example, eight of the first 19 players selected would have been ineligible for the draft.
It could have an especially powerful effect on next year's draft. Most NBA scouts believe that 17-year-old high school center Greg Oden would be the consensus No. 1 player in the 2006 draft. As we understand the rule, he would be ineligible for the 2006 NBA draft.
Stern wanted to keep NBA GMs and scouts out of high school gyms and it appears he will get his wish. Stern implied on Tuesday that there would be a directive from the league banning NBA GMs and scouts from scouting high school games.
However, it's unclear how the age minimum will actually improve the image of the league. In fact, the new rules could backfire in that regard and actually do some damage in the relationship between the NBA, colleges and hoops fans.
As the rules stand now, many players bypass college altogether. Under the new rules, more players will go to college, but more players than ever before will have their eye on the NBA the minute they step on campus. Just as fans are falling in love with a Carmelo Anthony, he'll be gone.
Will colleges really want to recruit guys like Oden, who they know will want to play for only one year as pit stop on his way to the NBA?
Couple that issue with the lowering of the age minimum to 18 for the NBDL, and the NBA may have created more harm than help for the NCAA. Expect to see more players skip college and go directly to the NBDL, where they'll get a one-year paid audition for NBA scouts before they are draft eligible.
The age minimum could be challenged in court. However, the league is confident the rule will hold up because it was collectively bargained. The NFL successfully defended a recent suit by former Ohio State running back Maurice Clarett. In May, a three-judge appeals panel said federal labor policy allows NFL teams to set rules governing when players can enter the league, stopping Clarett from entering last year's NFL draft.
Perhaps the most significant development in the new CBA will be the creation of a true NBA minor league via the NBDL. Both sides were interested in making this happen and it was never a serious impediment to the bargaining process.
The league wanted the minor league because it wanted to give teams an outlet to develop younger players. It should be especially beneficial to veteran teams with young players, like Darko Milicic, who can't crack the rotation.
The players wanted it because it would create more jobs. If a team sends a young player down to the NBDL, he wouldn't count on their active roster. That job would, in turn, go to a veteran.
The NBDL recently expanded to eight teams. Stern said his goal will be to add another seven teams by the start of the 2006-07 season. However, deputy commisoner Russ Granik told Insider that teams will be allowed to begin sending players to the D league this season.
Here are the key terms of the agreement on the NBDL:
? Each NBA team will be allowed to send players to a designated NBDL team, along with an assistant coach to monitor the players' development.
? The league will eventually expand to 15 teams, and two NBA teams will share each NBDL team.
? Players can be sent down to the NBDL for only the first two years of their career. Veterans cannot be assigned to an NBDL team.
? First-round picks will continue to be paid at the rookie wage scale. This was a key concession to the players, who didn't want owners to use the league as a way of cutting player salaries.
? Teams will retain the rights to all of their players and can recall them at any time.
? The NBDL will lower its age limit from 20 years to 18 years. That means that high school players who are ineligible for the draft will be able to play in the NBDL for a year before entering the draft. That dramatic change gives high school players another avenue into professional basketball (and an income source) should they choose to skip college.
A minor league will alter the draft strategy of teams, encouraging them to draft younger players with big upsides because of the ability to develop players down the road. This could have a big impact in this year's draft. Big-upside players like Martynas Andriuskevicius, Andrew Bynum, Yaroslav Korolev and Ersan Ilyasova suddenly look much more interesting to teams than they did 24 hours ago.
Now that teams have the option of drafting players and developing them in the minor leagues, look for more teams to reach, starting in this year's draft.
Rookie salary scale
Currently, first-round picks are tied into a league salary scale. When a first-round pick signs a contract, the first three years are guaranteed, with a team option for the fourth year. Players are paid a set amount based on where they were selected in the draft.
The new deal modifies that deal in favor of the owners. Under the new rules, first-round picks will get the first two years of their contract guaranteed. The third and fourth years of the contract will be team options.
The intended result by owners is to scare younger players away from the draft. The guaranteed payout will be smaller and the time they have to prove themselves in the league will be shorter.
It's unclear whether this rule will pertain to this year's rookies, but it's already having an effect. Several agents told Insider that they pulled their international guys because they weren't sure they could prove enough in two years to persuade teams to pick up their option for the third year.
Stern said on Tuesday that rookie signings and summer leagues can begin on July 1. However, the free agency period will be moved back slightly from July 15 to July 22 to allow time for the agreement to be fully drafted. Teams can negotiate with free agents from July 1 through July 21, but won't be allowed to sign them until July 22.
Most of the rest of the rules will alter how teams function in the free agent market. With changes to contract lengths, the cap and luxury taxes, look for teams to have more freedom to spend and for more player movement overall.
The current CBA puts a salary cap in place based on basketball-related income. The cap is set at 48 percent of BRI. Last year, that came to $43.87 million.
The cap will be raised to 51 percent of BRI. Depending on revenues, that could mean a cap next season of anywhere between $47 and $50 million.
This is a big concession to the players. With a larger cap, more teams will be able to spend on contracts each summer.
The Hawks, Bobcats, Cavaliers, Clippers, Bucks, Hornets and possibly the Suns will be the big winners here. It will allow each of them to get further under the cap to spend in free agency.
For this offseason, it shouldn't have a big effect on any of the other teams in the league.
Currently, players can sign a fully guaranteed contract for a maximum of seven years if they re-sign with their current team. Players signing with a new team in free agency can sign six-year deals.
This has been a sticking point for owners, who often get stuck with the bill for players who become injured or don't pan out. Prior to this agreement, teams have had only a few unappealing options other than hang on to him when they have had a player with a bad contract -- hope he retires, try to trade him (usually taking back another bad contract in return) or try to buy out the contract.
The owners' original proposal asked for contracts to be shortened to three and four years. The union wanted contract length to remain at six and seven years.
The two sides compromised, shortening the maximum number of contract years to five and six.
The lesser contracts may hurt older veterans a bit, but it may work to the advantage of younger players, giving them potentially an extra opportunity to sign a long-term contract.
For months, players and management remained far apart on this issue.
Under the expiring CBA, players are allowed maximum raises of 12.5 percent per year if they re-sign with their current teams and 10 percent if they sign with new teams in free agency.
The effect of those raises can be devastating to a franchise over time. For example, the Los Angeles Lakers, who last summer signed Kobe Bryant to a seven-year contract with 12.5 percent raises, are on the hook for $14.175 million this year. In 2010-11, they owe him $24.8 million.
Owners contended the raises were out of whack with the current financial realities. Last year, the salary cap stayed flat. In years past, it has increased by small, incremental amounts. If salaries are rising 10 percent per year and the cap is rising three percent, teams that are avoiding the luxury tax now won't be so lucky in three or four years.
Some clubs have tried to counter this trend by offering players flat contracts. However, very few agents or players agree to them.
To curb the growth of salaries, the owners proposed rolling back the maximum raises to five percent for players who re-sign with their current teams and four percent for players who sign with a new teams in free agency.
The two sides compromised by lowering the percentage of raises by two percent. Under the new proposed agreement, players will be allowed maximum raises of 10 percent per year if they re-sign with their current teams and eight percent if they sign with new teams in free agency.
It should only have a minimal impact on short-term payrolls but over the long haul should reduce them by about two percent.
Restricted free agency
Under current rules, teams have 15 days to match any offer sheet on a player they have restricted free agency rights to. This rule often drags out the free agency process for both teams and players.
Granik said in the new agreement the period that teams have to match will be shortened to seven days. That should have the effect of encouraging more teams to extend offer sheets to restricted free agents.
The Gilbert Arenas rule
Maybe it should be called the Carlos Boozer rule after the way Boozer, a restricted free agent last season, tempted the Cleveland Cavaliers into let him test the waters and then bolted to the Jazz while the Cavs sat by helplessly.
Currently teams that draft a player in the second round but don't sign him to a three-year contract risk losing the player via free agency if they are not under the cap.
This happened most recently with the Golden State Warriors when Gilbert Arenas got a huge offer from the Washington Wizards after his second season with the Warriors. Because the Warriors were over the cap, they were unable to match the deal.
The new agreement creates an exception for second-round picks. Teams can now match offers to second-round picks as long as the team still owns its mid-level exception. To make this rule work, the new agreement says that any team signing a second rounder to an offer sheet cannot offer more than the mid-level amount in the first year of the contract. However, after the first season of the contract, the player's salary can jump to the maximum allowable for a player with three or more years in the league.
So, to keep Arenas as an example, the Wizards would have been forced to offer Arenas $4.9 million in his first year. As long as the Warriors hadn't already spent their mid-level exception, they could have matched the Wizards offer and kept him under contract.
The NBA minimum wage, currently starting at $385,277 and increasing each year a player is in the league, will increase by three and a half percent. This was an obvious concession by the league and placated a large constituency of players who consistently sign deals for minimum wage.
Currently, teams can have a maximum of 15 players on their rosters, with a minimum of 11. Under the new agreement, the minimum will be raised to 14. This is another concession by the league.
The owners also have agreed to do away with the injured list, changing to inactive and active lists. That means teams no longer will have to concoct player injuries in order to manage their roster.
The infamous luxury tax is something for which neither side cares. However, it's Stern's biggest stick for beating the owners into submission for out-of-control spending.
Last season, teams whose payroll exceeded $54.6 million paid a dollar-for-dollar tax on the amount they were over the threshold. For example, the Knicks' payroll last season was $94.4 million. That means they paid the league $39.8 million in tax penalties. The total taxes paid by teams last season amounted to more than $157 million.
The luxury tax will continue to kick in when total player salaries exceed 61.1 percent of total basketball revenues. According to the league's press release, tax treatment for injured players and minimum-salary players will be liberalized. However, there are no details on what exactly that means.
Under the old agreement, luxury tax revenues were redistributed to non tax paying teams. Under the new agreement, luxury tax revenues will be distributed evenly among all 30 clubs. That means, in essence, that high paying tax teams like the Knicks will get a partial rebate on the taxes they paid.
The new CBA also makes two new exceptions to the luxury tax and salary cap, according to Granik.
First, under current rules players who are determined to be "permanently injured" cannot be taken off the books for two years. In the new agreement that number will be reduced to one.
Second, each team will be given a one-time option this summer to waive one player from its roster and receive luxury tax relief. The team will still have to pay the player and his salary will still count against the cap, but the team won't have to pay a luxury tax on his salary. For example, the Knicks' Allan Houston might a candidate to be waived because of this rule.
Player escrow accounts
Currently, players must pay 10 percent of their salaries into an escrow account each season. If, at season's end, the total amount of player salaries exceeds 57 percent of the league's total basketball-related income, that money goes to the owners. If it doesn't exceed 57 percent, the players get their money back.
For the past two seasons, salaries have been hovering at more than 60 percent of BRI, and the owners who have kept their payrolls below the league's luxury-tax threshold (and a few that have fallen within a certain "cliff threshold") have gotten millions back from the players.
The windfall teams got last year from the escrow tax and fees paid by owners who were over the luxury-tax threshold put roughly $8 million back in the pockets of those owners who were under the tax or in the cliff threshold.
For several teams, that rebate meant the difference between turning a profit and posting a loss for the season.
Owners compromised by agreeing to phase down the escrow taxes. Next season 10 percent will be take from paychecks if the threshold occurs. In seasons two through five of the deal, it will drop to nine percent. In the sixth year of the deal, it will drop again, to eight percent.
There is another significant development in this area. Under current rules, the NBA has sole discretion over the use of the escrow money. Currently, it redistributes the cash to teams that are under the luxury tax threshold. In essence, Los Angeles Clippers owner Donald Sterling gets a bonus for being cheap.
In the new agreement, the escrow money will be distributed equally among all 30 teams, lessening the impact of the luxury tax.
For years, both GMs and players have been complaining about restrictive trade rules that mandate all trades be within 115 percent and $100,000 of each other. Those rules make many prospective trades impossible.
The trade rules will be significantly loosened under the new CBA. The gap allowed between salaries traded and received will be increased to 125 percent and $100,000.